NADB, INFRASTRUCTURE AND COMPETITIVENESS

2 Raúl Rodríguez MEXICO’S COMPETITIVENESS DECLINE ( IMD’S RANKING AMONG 60 ECONOMIC REGIONS; 1 = BEST ) Source: IMD; The World Competitiveness Yearbook

3 Raúl Rodríguez  US – MX TRADE TRIPLED; DFI TRIPLED  PER CAPITA GDP RANK:  U.S.: 2 nd  MEXICO: 75 th  AVERAGE PER CAPITA GDP U.S. / MEXICO:  1980: 3 TIMES  2000: 4 TIMES  PER CAPITA GDP EVOLUTION :  PORTUGAL:FROM 38% TO 49% / U.S.  MEXICO:FROM 32% TO 25%  INCOME DISPARITIES: RICHEST 20% VS. POOREST 20%:  U.S.: 4 TIMES  MEXICO: 20 TIMES  MEXICO’S REGIONAL & SECTORAL DISPARITIES:  NORTH CONTRIBUTES THREE TIMES MORE THAN SOUTH TO GDP & GROWS TWICE AS FAST  LAST 6 YRS.: EXTERNAL SECTOR GREW 12.5 TIMES MORE RAPIDLY MEXICO: INTEGRATION WITH NO CONVERGENCE  POPULATION HAS DOUBLED IN:  U.S.: 60 YEARS  MEXICO: 30 YEARS

4 Raúl Rodríguez AGENDA FOR COMPETITIVENESS 1.PRESERVE OPEN & STABLE ENVIRONMENT 2.PURSUE STRUCTURAL REFORMS  FISCAL, ENERGY, LABOR, AGRIC., MUNICIPAL 3.IMPROVE GOVERNANCE & MODERNIZE INSTITUTIONS 4.REFORM JUDICIAL SYSTEM 5.REVAMP EDUCATION SYSTEM 6.INCREASE INFRASTRUCTURE INVESTMENTS

5 Raúl Rodríguez MEXICO: INFRASTRUCTURE & COMPETITIVENESS  MEXICO NEEDS TO INVEST > $ 25 BILLION ANNUALLY  $3.5 BILLION NEEDED FOR W & WW. FISCAL BUDGET MAY COVER < 30% NEEDS  WORLD RANKING (AMONG 60 ECONOMIC REGIONS) OF INFRASTRUCTURE AS KEY FACTOR FOR COMPETITIVENESS: U.S. 1 1 CANADA 11 6 MEXICO IMD World Competitiveness Yearbook

6 Raúl Rodríguez LENDING TO ENVIRONMENTAL SECTORS (WATER, WASTEWATER, SOLID WASTE) % OF TOTAL LENDING IN 2002  WORLD BANK: 2.8%  EUROPEAN BANK (EBRD): 5.1%  IDB: 6.1%  MEXICO:  CURRENT LINES OF CREDIT: DISBURSEMENTS < 15.3%  BANOBRAS: 10.6% OF TOTAL PORTFOLIO

7 Raúl Rodríguez COST RECOVERY IN PUBLIC UTILITIES (%)

8 Raúl Rodríguez ENVIRONMENTAL PROJECTS KEY ISSUES REVENUE / TARIFFS PLANNING & COORD. PERSONNEL EFFICIENCIES LEGAL FRAMEWORK POLITICS CREDIT- WORTHINESS GUARANTIES LOAN RATES & TERMS SIZE, RISKS & RETURNS DISEÑO PROJECTSUCCESS FINANCIAL TECHNICAL ADMINISTRATIVE POLITICAL BIDS & CONTRACTS TIME DESIGN BUDGET & FUNDING

BECC - NADBank

10 Raúl Rodríguez NADBank: INITIAL SLATE ( )  LIMITED MANDATE:  SECTORS: WATER, WASTEWATER, SOLID WASTE  GEOGRAPHY: 100 KM.  LIMITED INSTRUMENTS:  LENDING AT MARKET RATES; NO SUBSIDIES  NO GRANTS, NO TECHNICAL ASSISTANCE  NO SOVEREIGN GUARANTIES

11 Raúl Rodríguez  IMPROVED FINANCIAL INSTRUMENTS  EXPANDED SECTORS, WITHIN ORIGINAL CHARTER:  AGRICULTURAL WATER USE EFFICIENCY (CONSERVATION)  INDUSTRIAL PRETREATMENT  AIR QUALITY / TRANSPORTATION SYSTEMS  CLEAN ENERGY  INDUSTRIAL WASTE & SITE REMEDIATION  INDUSTRIAL BY-PRODUCT USE & RECYCLING MANDATE REVIEW – FIRST STEP NOVEMBER 2000

12 Raúl Rodríguez NADBank PROGRAMS  LOANS & GUARANTIES  INSTITUTIONAL ADVISOR  MARKET RATE PROGRAM  LOW INTEREST RATE PROGRAM  GRANTS  BEIF, SWEP & WCIF  TECHNICAL ASSISTANCE / TRAINING  IDP, PDP, UMI

13 Raúl Rodríguez NADBank PROJECTS June 2004 NADB LOANS & GRANTS (76) TECHNICAL ASSISTANCE STUDIES (151)

14 Raúl Rodríguez NADBank PERFORMANCE (MILLIONS OF DOLLARS; CUMULATIVE) 33%5340 NADBank Employees 494%487 in 86 communities 82 in 39 communities Utility Personnel Trained 66%154 in 77 communities 93 in 64 communities Technical Assistance Projects - 79% 5 / 1 24 / 1 Grant-to-Loan Ratio* 159%$2,259$871 Total Cost of the Infrastructure Projects 147%7932 Infrastructure Projects 136%$680$287 Total Funding Approved Increase 06 / / 2000 * Water Conservation Investment Fund financing not included.

15 Raúl Rodríguez RATE 33% MANDATE EXPANSION 2% MISCELLANEOUS 11% SOLID WASTE 5% FINANCIAL ANALYSIS 6% BILLING 7% MIS 7% LINE SURVEYS 8% USER REGISTRIES 9% MANAGEMENT 12% TECHNICAL ASSISTANCE MARCH 2004  UMI: TRAINING IN MANAGEMENT & FINANCE  487 PARTICIPANTS FROM 91 COMMUNITIES  151 STUDIES IN 77 COMMUNITIES  113 STUDIES COMPLETED, 38 IN PROGRESS  MONITORED BY TEJEDA CENTER

16 Raúl Rodríguez SECOND STEP: MONTERREY PROPOSALS FOX - BUSH MEETING ON 3 / 22 / 02  GEOGRAPHIC SCOPE: 300 KM IN MEXICO  ADDITIONAL FINANCIAL INSTRUMENTS  STRUCTURE & PROCESS:  SINGLE BOARD FOR NADBank & BECC

17 Raúl Rodríguez NADB JURISDICTION

18 Raúl Rodríguez NADB JURISDICTION (% 0F POPULATION ELIGIBLE)

19 Raúl Rodríguez NADBank CURRENT KEY STRUCTURAL TASKS  PROMOTE FURTHER UTILITY EFFICIENCY GAINS  HELP CREATE CREDIT CAPACITY  PROMOTE PUBLIC - PRIVATE PARTNERSHIPS  LINK CAPITAL MARKETS AND PROJECTS  HELP FOSTER MUNICIPAL / UTILITY REFORMS  AND… GET MORE $